Investor Education

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Overview

Concept

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.

The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

Advantages of Mutual Fund

The advantages of investing in a Mutual Fund are:

Professional Management

Diversification

Convenient Administration

Return Potential

Low Costs

Liquidity

Transparency

Flexibility

Choice of schemes

Tax benefits

Well regulated

Organization of Mutual Fund

Organization of Mutual Fund

Types of Mutual Fund

Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

BY STRUCTURE

Open - Ended Schemes

Close - Ended Schemes

Interval Schemes

BY INVESTMENT OBJECTIVE

Growth Schemes

Income Schemes

Money Market Schemes

OTHER SCHEMES

Tax Saving Schemes

Special Schemes

Index Schemes

Sector Specific Schemes

Frequently used terms

Net Asset Value(NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Redemption Price

Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load

Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase or ‘Back-end’Load

Is a charge collected by a scheme when it buys back the units from the unitholders.